So, many struggle to work their way out of debt. We do everyday. For years it seemed like everytime we paid something off, a new debt would accrue. I think we finally found the method that works for us!
With having a new baby, a new car payment, student loans, a mortgage, and a few nice store credit card debts, out debt seemed to keep piling up. However, after only a few months, have knocked out about $3000 of debt and saved just as much! Here is what we did:
1. I first read Dave Ramsey's book, Total Money Makeover. You can get this book at any bookstore or at daveramsey.com. His plan is a little more extreme than ours, but gave us a great idea as to how to get started.
We already had $1000 in savings, but wanted to have more because of everything on our plate. We also knew that setting a super tight budget and going cash only would be very difficult for us. We also lucked out that I was hired for a full-time teaching position which gave us a little extra money to put into savings.
2. I created an excel sheet that layed out all our debts. It is close to exact amounts, however, I'm not too saavy in interest equations to make them come out exact. This layed the order in which the debts would be paid off, what month they would be paid off, how much would be paid each month and how much would be in savings. For me, I need the visual to see the progress.
3. Using the Debt Snowball approach, we tackle 1 debt at a time while paying a small amount to the other debts - at least minimum. We set our own minimums a little above the required minimum.
Using this system has worked wonders for us. We were able to get new tires on both vehicles and some repairs on another without being set back. We just post-poned the snowball 2 months and resumed again. I won't say that our system is flawless, but it has put us more at ease financially. We are able to plan for home renovations and family vacations while getting out of debt! YAY US!!
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